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ANNUAL REPORT 2010
HKSE : 303

Table of contents

  • Page 1
    HKSE : 303 ANNUAL REPORT 2010

  • Page 2
    ...America, Europe and Asia Pacific. Apart from the well-known VTech brand, the Group has the rights to use the AT&T brand in connection with the manufacture and sale of its wireline telephones and accessories. Shares of VTech Holdings Limited are listed on The Stock Exchange of Hong Kong Limited (HKSE...

  • Page 3
    ... pts 3.6% pts 4.1% pts 7.5% pts Group Revenue in Last 5 Years US$ million Profit Attributable to Shareholders of the Company in Last 5 Years US$ million Dividend per Share in Last 5 Years US cents 1,800... a special dividend of US30.0 cents per share VTech Holdings Ltd Annual Report 2010 01

  • Page 4
    ... products. CMS saw lower demand for switching mode power supplies and wireless products, which offset gains in professional audio equipment. Results and Dividend Group revenue for the year ended 31 March 2010 rose by 5.8% over the previous financial year, to 02 VTech Holdings Ltd Annual Report...

  • Page 5
    ...Gains in Market Share Operational Excellence In Asia Pacific, all product lines achieved sales increases. The growth was mainly attributed to our agreement with Telstra to be its direct supplier of fixed line telephones, and orders from a major customer in solid state lighting. Sales from other...

  • Page 6
    .... With a 4.3 inch colour display, stories come to life on V.Reader through narration, music, animation and interactions. MobiGo is a handheld educational gaming system for children aged three to eight. With its colour touch screen and slide-open keyboard, MobiGo puts the world of educational fun at...

  • Page 7
    .... For Asia Pacific, all product lines achieved sales increases. Sales of TEL products to Asia Pacific rose by 59.0% to US$22.9 million. The growth was partly due to higher sales to Australia following the agreement with Australian telecommunications and information services company Telstra. For...

  • Page 8
    ...financial year 2010. With better foreign exchange risk management, exchange loss arising from the Group's global operations in the ordinary course of business was minimal in the financial year 2010. This contrasted...10 06 07 08 09 10 0 06 07 08 09 10 06 VTech Holdings Ltd Annual Report 2010

  • Page 9
    ...financial year 2011. All of these capital expenditures will be financed from internal resources. As of the financial year end date, the Group had no material contingencies. VTech Holdings Ltd Annual Report 2010 Stocks as at 31 March 2010 increased by 24.5% over the balance at 31 March 2009 to US...

  • Page 10
    ... board spectrum of age groups, from infants to pre-teens, and from standalone to platform products: • Standalone products - Infant toys - Pre-school toys - Electronic learning aids - Jungle Gym Platform products - V.Reader Animated e-Book System - MobiGo Touch Learning System - V.Smile TV Learning...

  • Page 11
    ...-stop shop electronic manufacturing services to medium sized companies who are leaders in Professional audio equipment Switching mode power supplies Home appliances, including solid state lighting Communications products Revenue in North America by Product Line for the year ended 31 March 2010 TEL...

  • Page 12
    Telecommunication Products 808-595-9511 5:25PM 5/21

  • Page 13
    Fixed line telephones are our business. Whether corded or cordless, for home or commercial use, VTech and AT & T telephones have become the number one choice for individuals and businesses around the world. Almost in the US 50% market share * Over handsets shipped in F 2010 * Source: NPD, ...

  • Page 14
    Electronic Learning Products

  • Page 15
    VTech has made learning fun for 30 years. Since the launch of Lesson One in 1980 - one of the very first ELPs - we have been making the innovative, educational electronic toys that parents and kids love and trust. Over units of product shipped in F 2010 Supplies ELPs in 30 million 20 languages

  • Page 16
    Contract Manufacturing Services

  • Page 17
    Excellent customer service and product quality are what makes our CMS so highly sought after. Continuous sales growth in the last five years is a testament to our success in the EMS industry. World's provider ** top 50 EMS Strong reputation in professional audio area ** Source: Manufacturing ...

  • Page 18
    Review of Operations North America 57.0% SynJâ„¢, the only SMB telephony system in the US market to feature optional DECT 6.0 repeaters, gives an unprecedented talk range of up to half a mile. of Group Revenue 16 VTech Holdings Ltd Annual Report 2010

  • Page 19
    ... product launch in the financial year 2010 was the Jungle Gym line. This product line combines electronic learning, fun and physical activities. Products in this line are sold outside the traditional learning aisle and have therefore created a new avenue for growth for VTech's ELPs. Within the line...

  • Page 20
    ... Group Revenue Co-branded "T-Home/VTech" products based on our exclusive agreement with Deutsche Telekom appeared on the shelves in August 2009 in Germany, with the full product range reaching the shelves in the final quarter of the financial year 2010. 18 VTech Holdings Ltd Annual Report 2010

  • Page 21
    ... to see gains in professional audio equipment as existing customers increased orders. Switching mode power supplies will see growth opportunities in the new business areas of solar power inverters and electric vehicle chargers in the financial year 2011. VTech Holdings Ltd Annual Report 2010 19

  • Page 22
    Review of Operations Asia Pacific & Other Regions 8.5% 20 VTech Holdings Ltd Annual Report 2010 of Group Revenue In June 2009, we signed an agreement with the leading Australian telecommunications and information services company Telstra, for which VTech is now its direct supplier of fixed line...

  • Page 23
    ... information services company Telstra, for which VTech is now its direct supplier of fixed line telephones. For ELPs, sales in the region rose by 23.4%, to US$15.8 million during the financial year. CMS exhibited similarly strong growth to that of TEL products in Asia Pacific, with sales rising...

  • Page 24
    ... financial information. Up-to-date information on the Group's developments, financial data and stock information can be found at the corporate website www.vtech.com. All key information is available electronically. The average number of employees for the financial year 2010 was 27,100, a decrease...

  • Page 25
    ..."connected home". The programme allows VTech to offer job opportunities and internships for students, who we select on the basis of design submissions. In Hong Kong, the Group is recognised as a "Caring Company" by the Hong Kong Council of Social Service, in recognition of our work for the community...

  • Page 26
    ... environment. We always try to make our products more energy efficient. We also aim to use fewer components. This reduces our cost of materials, waste and the impact on the environment. At the same time, consumers get the direct benefit of energy savings. 24 VTech Holdings Ltd Annual Report 2010

  • Page 27
    ... Holdings Limited was ranked 54th globally, and first among Hong Kong companies in Business Week's 2009 InfoTech100, a listing of the world's best performing technology companies. The magazine also ranked VTech number four on its list by return on equity. Electronic Learning Products V.Smile Motion...

  • Page 28
    ... Holdings Limited won the "Overall Best Managed Company in Hong Kong - Medium Cap" in the AsiaMoney Awards 2009. Electronic Learning Products Kidizoom was named one of the "Top 12 Toys for Christmas" by the Toy Retailers Association in the United Kingdom. 26 VTech Holdings Ltd Annual Report 2010

  • Page 29
    .... VTech Electronics Europe GmbH won the "Best Service after Sales Award" in Belgium, given by Toys & Games Magazine. VTech Communications Limited was presented a "Supplier of the Year 2010 Award" by a customer in communications products. HKSE : 303 Bringing Innovation to Life ANNUAL REPORT 2009...

  • Page 30
    ... Governance Practices VTech Holdings Limited is incorporated in Bermuda and has its shares listing on The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"). The corporate governance rules applicable to the Company is the Code on Corporate Governance Practices (the "Code") as set...

  • Page 31
    ... met to review the audited Group financial statements and reports for the year ended 31 March 2010 in conjunction with the Company's external auditor, senior management and internal auditor before recommending them to the Board for consideration and approval. The Group's annual results announcement...

  • Page 32
    ... statements of the Group is set out in the Independent Auditor's Report on page 36 of the annual report. Other control and management Code of Conduct The Company's policy on Code of Conduct is also an important part of the Group's internal control process. Employees are required to strictly...

  • Page 33
    ...nonexecutive director of China-Hong Kong Photo Products Holdings Limited and Li & Fung Limited. PANG King Fai, aged 54, Executive Director and President of the Group, holds BSc (Eng) from the University of Hong Kong, MPhil from Imperial College of Science, Technology and Medicine, London and PhD (EE...

  • Page 34
    ... in developing supply chain systems with leading corporations in North America including The Stanley Works, Inc. Mr. DELANY holds a Bachelor Degree in Marketing and Financial Management from the University of South Africa & Damlein College. William TO, aged 54, President of VTech Electronics North...

  • Page 35
    ... address in Hong Kong will receive the equivalent amount in Hong Kong dollars which will be calculated at the rate of exchange as quoted to the Company by The Hongkong and Shanghai Banking Corporation Limited at its mid rate of exchange prevailing on 21 July 2010. Directors' Service Contracts None...

  • Page 36
    ... (within the meaning of Part XV of the SFO) which were required to be recorded in the register kept by the Company pursuant to Section 352 of the SFO or otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code. 34 VTech Holdings Ltd Annual Report 2010

  • Page 37
    ...the customers and the suppliers noted above. Public Float Based on the information publicly available, the Company has maintained at least 25% of the total issued share capital of the Company to be held by the public at all times during the year ended 31 March 2010 and up to the date of this report...

  • Page 38
    ... and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. KPMG Certified Public Accountants 8th Floor, Prince's Building 10 Chater Road Central, Hong Kong 14 June 2010 36 VTech Holdings Ltd Annual Report 2010

  • Page 39
    ... Director PANG King Fai Director The notes and principal accounting policies on pages 39 to 65 form part of these financial statements. Details of dividends payable to shareholders of the Company attributable to the profit for the year are set out in note 5. VTech Holdings Ltd Annual Report 2010...

  • Page 40
    ... Director 18 & 19 5 5.8 (140.7) (134.9) 3.5 (45.3) 242.2 196.9 6.9 (154.9) (148.0) (11.0) (43.2) 285.4 242.2 382.6 (185.7) 287.2 (45.0) 14 196.9 242.2 The notes and principal accounting policies on pages 39 to 65 form part of these financial statements. 38 VTech Holdings Ltd Annual Report...

  • Page 41
    ... ("IFRSs") promulgated by the International Accounting Standards Board ("IASB"). IFRSs includes International Accounting Standards ("IASs") and related Interpretations. These financial statements also comply with the disclosure requirements of the Hong Kong VTech Holdings Ltd Annual Report 2010 39

  • Page 42
    ... on the reported results and financial position of the Group for the current or prior accounting periods. D Changes in Accounting Policies The IASB has issued the following new, revised and amended IFRSs that are first effective for the current accounting period of the Group and the Company and...

  • Page 43
    ... (see note (L)) in the Company's balance sheet. Amortisation is calculated to write off capitalised development costs on a straight-line basis over their estimated useful lives, commencing from the date when the products are put into commercial production. H Foreign Currencies Foreign currency...

  • Page 44
    ...remote are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating...42 VTech Holdings Ltd Annual Report 2010

  • Page 45
    ..., if no impairment loss had been recognised. - Interim financial reporting and impairment Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with IAS 34, Interim financial...

  • Page 46
    ... for financial reporting purposes and the tax bases respectively. Deferred tax assets also arise from unused tax losses and unused tax credits. T Employee Benefits The Group operates a number of defined contribution retirement schemes throughout the world, including Hong Kong, and a defined...

  • Page 47
    ...equity related compensation benefits The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the Black-Scholes option pricing model, taking into account the...

  • Page 48
    ... the Group's most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following reportable segments North America (including the United States and Canada) Europe Asia Pacific Others, which covers sales of electronic products to...

  • Page 49
    ...fair value through profit or loss 11.2 2.0 3.6 18.3 34.1 - - 12.0 2.6 1.7 22.5 35.0 28.2 (0.6) Auditors' remuneration - audit services - audit related services - tax and other services 2010 Note US$ million 0.8 0.1 0.4 2009 US$ million 0.8 0.1 0.4 - (0.2) VTech Holdings Ltd Annual Report 2010 47

  • Page 50
    ...non-executive director of the Company on 5 September 2008. (vii) Share-based payments represent the fair value of share options granted to the directors which were charged to the income statement in accordance with the accounting policy set out in Note (T). 48 VTech Holdings Ltd Annual Report 2010

  • Page 51
    ...the balance sheet date 2009 US$ million During the years ended 31 March 2009 and 31 March 2010, there were no amounts paid to directors and individuals for compensation for loss of office and inducement for joining the Group. 4 Taxation 2010 Note US$ million Current tax - Hong Kong - Overseas Over...

  • Page 52
    ...earnings per share is based on 247.7 million (2009: 245.3 million) ordinary shares which is the weighted average number of ordinary shares in issue during the year after adjusting for the number of dilutive potential ordinary shares under the Company's share option scheme. Weighted average number of...

  • Page 53
    ...17.3 29.8 5.1 Net book value of revalued land and buildings had the assets been carried at cost less accumulated depreciation 5.1 Notes: (i) At 31 March 2010, the Group assessed the recoverable amount of the construction in progress in accordance with the accounting policy set out in note (L) and...

  • Page 54
    ...The tax losses arising from Hong Kong operations do not expire under current tax legislation. The tax losses arising from the United States operations expire up to 20 years after the relevant accounting year end date, depending on the relevant jurisdiction. 52 VTech Holdings Ltd Annual Report 2010

  • Page 55
    ... of 30 to 90 days. Certain open credit sales are covered by credit insurance or bank guarantees. Impairment of trade debtors Impairment losses in respect of trade debtors are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the...

  • Page 56
    ... the Group during the year were calculated based on advice from Watson Wyatt Hong Kong Limited, a Towers Watson company ("Towers Watson"), independent actuaries and consultants. The Scheme is valued annually. The latest actuarial valuation was completed by Towers Watson as at 31 March 2010 using the...

  • Page 57
    ... 20.0 18.7 1.3 1.3 (1.2) (6.4) - 13.7 The principal actuarial assumptions used as at 31 March 2010 (expressed as weighted average) are as follows: Discount rate Expected rate of return on plan assets Future salary increases 3.0% 7.0% 5.0% 2.0% 7.0% 5.0% VTech Holdings Ltd Annual Report 2010 55

  • Page 58
    ... closing price of the shares of the Company as stated in the Hong Kong Stock Exchange's daily quotation sheet for five business days immediately preceding the date of grant. Pursuant to Chapter 17 of the Listing Rules, the Company can issue options so that number of shares that may be issued upon...

  • Page 59
    ... statement are determined using the Black-Scholes option pricing model based on the following assumptions: 23 March 2005 (Note 1) Fair value of each share option as of the date of grant Closing price at the date of grant Exercise price Expected volatility Annual risk-free interest rate Expected...

  • Page 60
    ... for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher...

  • Page 61
    ...major financial institutions with sound credit ratings. Trade debtors are presented net of the allowance for doubtful debts. Credit risk with respect to trade debtors is limited due to the large number of customers comprising the Group's customer base...127.8) VTech Holdings Ltd Annual Report 2010 59

  • Page 62
    ...The Group enters into foreign exchange contracts in order to manage its ...Group's profit after tax and total equity is not expected to be material in response to possible changes in the foreign exchange rates of other currencies to which the Group is exposed. 60 VTech Holdings Ltd Annual Report 2010

  • Page 63
    ... it is not meaningful to disclose the fair values. (e) Fair values The fair values of trade debtors, deposits and cash and trade creditors and accruals approximate their carrying amounts due to the short-term maturities of these assets and liabilities. VTech Holdings Ltd Annual Report 2010 61

  • Page 64
    ... any significant input is not based on observable market data. The Group has entered into agreements with an independent third party in the PRC to lease factory premises in Houjie, Dongguan comprising several factory buildings. There are a number of leases which expire in 2010, 2011, 2012, 2019 and...

  • Page 65
    ... (Australia) Pty Limited AUD 1 *100 Sale of telecommunication products Incorporated/established and operating in Canada: VTech Technologies Canada Limited Class A CAD5,000 Class B CAD195,000 *100 *100 Sale of telecommunication and electronic products VTech Holdings Ltd Annual Report 2010 63

  • Page 66
    ... interest held by the Group *100 Name of subsidiary Incorporated/established and operating in France: VTech Electronics Europe S.A.S. Incorporated/established and operating in Germany: VTech Electronics Europe GmbH VTech Funkwerk IAD GmbH Principal activity Sale of electronic products EUR 500,000...

  • Page 67
    ... expected to be available for use. The Group reviews annually their estimated useful lives, based on factors that include asset utilisation, internal technical evaluation, technological changes, environmental and anticipated use of the assets tempered by related industry benchmark information. It is...

  • Page 68
    ... per share (US cents) 1,204.6 140.1 (11.3) 128.8 128.8 - 128.8 54.9 1,463.8 201.5 (18.6) 182.9 182.9 - 182.9 76.6 1,552.0 237.6 (21.9) 215.7 215.7 - 215.7 89.4 1,448.2 159.0 (15.8) 143.2 143.2 - 143.2 58.5 1,532.3 225.5 (20.2) 205.3 206.5 (1.2) 205.3 83.7 66 VTech Holdings Ltd Annual Report 2010

  • Page 69
    ... Public Accountants Hong Kong Remuneration Committee Michael TIEN Puk Sun (Chairman) William FUNG Kwok Lun Denis Morgie HO Pak Cho Risk Management Committee Allan WONG Chi Yun (Chairman) PANG King Fai Andy LEUNG Hon Kwong Company Secretary CHANG Yu Wai VTech Holdings Ltd Annual Report 2010 67

  • Page 70
    ... per share US62.0 cents per share Investor Relations Contact Corporate Communications Department 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po New Territories Hong Kong Tel: (852) 2680 1000 Fax: (852) 2680 1788 Email: [email protected] Website www.vtech.com...

  • Page 71
    VTech Group of Companies Head Office VTech Holdings Limited 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po, New Territories Hong Kong Tel: (852) 2680 1000 Fax: (852) 2680 1300 Website: www.vtech.com Email: [email protected] Germany VTech Electronics Europe GmbH ...

  • Page 72
    VTech Holdings Ltd (Incorporated in Bermuda with limited liability) 23rd Floor, Tai Ping Industrial Centre, Block 1 57 Ting Kok Road, Tai Po, New Territories, Hong Kong Tel: (852) 2680 1000 Fax: (852) 2680 1300 Email: [email protected] www.vtech.com